On this day in 1836, Mexican General Santa Anna signed the Treaties of Velasco, acknowledging the conclusion of the Texas Revolution. Although the young republic would be annexed by the United States less than a decade later, Texas remains fiercely independent to this day.

Perhaps nowhere is the state’s sense of autonomy more noticeable than in its economy. While the rest of the country has been hampered with slow economic growth and stubbornly high unemployment, the Great Recession barely registered on Texas’ radar. The state’s economy contracted just 0.5 percent in 2009 and grew by 4.1 percent in 2010. And when it comes to job creation, Texas has outperformed the nation by more than 2-to-1 since 1990.

The rest of America waits anxiously to see what Janet Yellen does with the reins of the Federal Reserve, but it is hard to fault many Texans for their indifference to her ascension. In normal times, that is an altogether sensible attitude, but normal does not describe our current monetary status. That is why the George W. Bush Institute will host a conference on Monday featuring Ben Bernanke to discuss the Federal Reserve’s role in the economy.

The primary task of the Federal Reserve chair is to guard against inflation, or as one central banker famously quipped, to take away the punch bowl just as the party starts getting fun. However, Congress also expects the Fed to help mitigate economic downturn: In 2008, it commenced an unprecedented monetary expansion in an attempt to stanch the financial market meltdown and stave off a full-blown depression. It’s an effort that continues to this day, with only modest tapering.

Today, Texas businesses benefit from record-low interest rates resulting from this accommodative monetary policy, particularly in capital-intensive industries like oil and IT. And because Texas experienced a relatively tame property bubble (thanks to a surfeit of common sense when it comes to land and building regulations), financial markets reopened for business sooner in Texas than in the rest of the nation.

But the country cannot continue to have interest rates near zero much longer: Besides the deleterious effect low interest rates have on how much people save in the long run, it also makes it difficult for the Fed to act to stimulate the economy should it again be needed. The various rounds of quantitative easing proved that the Fed needn’t be constrained from stimulus when the interest rate is near zero, but borrowing rates this low distort the economy in myriad ways not altogether comprehensible — and may become manifest in yet another asset bubble.

Not surprisingly, among the most pressing issues at the Fed’s bimonthly Open Market Committee meetings is what on earth it’ll do the next time there’s a recession.

Despite the occasional irrational exuberance among economists who want to believe the contrary, the business cycle will be with us for the indefinite future — even in Texas. It behooves our politicians to do what they can to lessen the probability of future recessions, while boosting economic growth during the good times so we have more of a cushion when things inevitably turn downward.

This means America needs to get its fiscal house in order and come to grips with the looming deficits driven by unfunded entitlement obligations. And with regard to monetary policy, the Fed needs to assertively taper its latest round of monetary expansion, returning us to a more normal world where borrowers pay positive interest rates on loans and bank deposits earn a rate of return that makes it worth saving. Practicing good monetary policy is not always politically popular or easy, but at this critical economic juncture, it is necessary.

Otherwise, when — not if — the next recession comes, the government and the Federal Reserve may find themselves with few tools to counteract it other than trying to talk up the economy. In Texas parlance, that’s what we refer to as all hat and no cattle.

Ike Brannon is a fellow at the Bush Institute and president of Capital Policy Analytics, a consulting firm in Washington, D.C. Machir Stull manages the economic growth initiative at the Bush Institute. They may be contacted at economicgrowth@bushcenter.org. Monday’s event is not open to the public but can be watched online at bushcenter.org/live.